Opinion
No 25451
Decided December 26, 1935.
Public Utilities Commission — Demand or service charge for electricity — Order, finding charge not preferential or discriminatory, not unlawful or unreasonable.
An order of the Public Utilities Commission that a demand or service charge for electric energy, based upon the number of connected lamps on consumer's property, is not preferential or discriminatory, is not unlawful or unreasonable.
ERROR to the Public Utilities Commission.
Paul Smith, representing himself and several hundred other farmers living in Williams county, and in nearby towns of Defiance and Fulton counties, Ohio, filed with the Public Utilities Commission a complaint against the Lake Shore Power Company, alleging that they are purchasers of electric energy from said company; that they built or paid for the building of a large part of the electric energy transmission system throughout the territory in which complainants live, and that in consideration of such action on their part they were to receive electric energy at a lower rate; that in spite thereof the Lake Shore Power Company had raised the rates, and that the amounts paid for electric energy, including the service charge, is grossly excessive, unjust, unreasonable, discriminatory and unjustly preferential; that the rates are not uniform; that they are in excess of the reasonable cost of the service; that a service charge of $1.25 per month is made for other consumers residing in and near the town of Ney in Defiance county, but that complainants are compelled to pay from $1.50 to $2.40 per month for similar service.
It appears from the testimony of Mr. W.E. Tremble, engineer for the Lake Shore Power Company, that the charge which the company makes for electric energy is based upon the maximum demand the consumer makes upon the company; that the extent of the maximum demand is determined by the number of watts of the lamps which are connected on the premises of consumer; that connected lamps are figured and empty sockets are not; that plugged-in appliances, electric ranges or small motors which can be put on a light circuit are not considered in determining the wattage of the connected load; that for a demand of five hundred watts there is a charge of $1.50 per month and that for each additional one hundred watt demand or fraction thereof there is a charge of 30¢; that for the first five hundred watts of connected load, the demand is taken at 100% of the connected load; that for all over five hundred watts the demand is taken at 20% of the connected load, and that, consequently, the demand charge varies with the customer, depending upon and varying with the total wattage of lamps connected on his premises.
The testimony of Mr. Tremble further discloses that of the 238 customers who are complainants 109 have a demand charge of $1.50 per month, 101 have a demand charge of $1.80 per month, 23 have a demand charge of $2.10 per month and 5 have a demand charge of $2.40 per month; that no customer within the territory in question has a demand charge of $1.25 per month, contrary to the claim made by complainant.
The complainant sought a finding by the Public Utilities Commission declaring the rates charged to be grossly excessive, unjust, unreasonable, discriminatory, unjustly preferential, and not uniform, and an order directing the submission of a new rate schedule.
The Public Utilities Commission dismissed the complaint on May 10, 1935, and found that "the rates of the defendant do not unduly prefer any consumers and are not unjustly discriminatory as against other consumers."
Error is prosecuted to this court to reverse the order of the Public Utilities Commission, to have the cause remanded with instructions to sustain the complaint as to the demand charge, and as to the price charged for electric energy, and to order a new rate schedule.
Messrs. Newcomer Parker, for plaintiffs in error.
Mr. John W. Bricker, attorney general, and Mr. Donald C. Power, for the Public Utilities Commission.
Messrs. Tracy, Chapman Welles, for the Lake Shore Power Company.
This is not an action to enforce a contract, but one to determine the reasonableness of a rate independent of contract. We shall confine ourselves, therefore, to the consideration of the controlling question in the case, namely, whether a demand or service charge for electric energy based upon the number of connected lamps on consumer's property is preferential and discriminatory or fair and reasonable.
Does the fact that the demand or service charge varies with different customers, depending upon the connected load, render the rate not uniform?
Cost of production, in large measure, determines the price at which a manufactured article is to be sold. Ordinarily, manufactured articles can be stored until sold and the plants producing them can continue to operate up to their normal capacity without interruption or interference. However, a different condition prevails in the manufacture of electric energy. Generally speaking, electric current is not subject to storage and must be produced as required. Consequently, these plants must hold themselves in constant readiness to serve consumers up to maximum capacity. Difficulty usually arises in the attempt to determine the amount of the charge to be made. A number of different methods are employed in fixing rates, among them being the one employed in the instant case, namely, a charge based upon the connected wattage demand per month per customer. Under this method the monthly sum charged varies with the wattage of the lamps connected, regardless of whether any current has been consumed or not. The rate charged in the instant case is $1.50 for 500 watts of maximum demand per month per consumer and 30¢ for each additional one hundred watt demand or fraction thereof.
How is the "maximum demand" determined?
It is determined in the instant case by considering the maximum demand as 100% of the connected load for the first five hundred watts and as 20% of the connected load over five hundred watts, with a minimum demand for each customer of five hundred watts.
Complaint is that the charges thus made are unfair because they are different to different classes of consumers; that the consumer who uses lights a little pays a higher rate than the consumer who uses the lights more and who greatly exceeds the minimum wattage allowed.
We are inclined to the view, however, that that fact does not render the rate unequal, unfair or discriminatory. While a consumer may use little or no energy a demand is nevertheless placed upon the utility to meet the maximum demand of the connected wattage when the need arises, and this demand, however remote it may be, of necessity adds to the cost of maintenance, operation and production.
We think it is somewhat comparable to the automobile in that the owner who uses his automobile a comparatively few miles a year must pay more per mile than he who uses it many miles per year, by reason of the capital investment and depreciation as a result of the passage of time.
The company must hold itself in readiness to furnish the maximum demand at all times, and it is only fair and proper that the charge be made to depend upon the readiness to furnish the maximum demand rather than to vary with the amount of current actually furnished. Whether one customer uses his connected lamps more than another is immaterial in view of the fact that the fixed cost to the company for holding itself in readiness remains the same. The question is not so much the amount of electrical energy consumed as it is the expense necessary to provide sufficient and adequate equipment to render the service responsive to the possible maximum demands of the consumers. The method of charging employed in the instant case insures an equitable distribution of the cost of service among all.
We find no undue or unjust discrimination in favor of any class of customers. We consider the schedule of rates, in the instant case, both as to producer and to consumer, to be fair and reasonable, and therefore they should not be disturbed.
Order affirmed.
STEPHENSON, WILLIAMS, JONES, MATTHIAS and ZIMMERMAN, JJ., concur.
WEYGANDT, C.J., dissents.